What Is IRS Form 1065?

Tax season is picking up — are you ready to file your 2023 returns?

Between federal, state, and local taxes, there’s a lot to think about.

Filing obligations also vary dramatically depending on your business type.

Form 1065 is the standard tax document for US-based partnerships.

In this article, we’ll explain everything you need to know about Form 1065, including:

• Who needs to file
• What information is included
• Other forms you may need to file during tax season

What Is Form 1065?

IRS Form 1065 is the primary form used to report a partnership’s financial status.

Partnerships are pass-through entities, which means that their income is taxed as the personal income of the members.

With that in mind, filing Form 1065 doesn’t make you responsible for any additional tax payments.

Rather, it’s used by the IRS to maximize transparency and ensure that your partnership reporting matches the income reporting of the individual members.

Who Needs to File?

Aside from a few exceptions, all US-based partnerships must file Form 1065 to report their financial situation to the IRS. Partnerships include:

• General partnerships (including unincorporated partnerships)
• Limited partnerships
• Multi-member LLCs
• 501(d) religious nonprofits

Form 1065 is due on the 15th day of the third month following the end of the partnership’s tax year.

Assuming your business followed the 2023 calendar year, this means that the deadline for Form 1065 will be March 15th, 2024.

LLCs with multiple members are automatically taxed as partnerships unless they submit Form 2553 or 8832 and elect to file as a corporation.

On top of Form 1065, partnerships also need to submit a separate Schedule K-1 form for every partner.

This document reports the income, losses, and dividends allocated to each individual partner.

Who Is Exempted From Filing?

As mentioned above, there are a few exceptions to the Form 1065 requirement for partnerships.

If you don’t have any income or expenses to report, then there’s no need to file Form 1065.

Similarly, foreign partnerships with US members are exempt from this requirement if they meet the following criteria:

• No income that’s “effectively connected” to a US business
• Less than $20,000 in US-source income
• Less than 1% of income, gain, loss, deductions, or credits connected to US partners
• Not a withholding foreign partnership

It may be tough to determine whether you meet these conditions — you can find more details on the IRS website.

What Information Do I Need?

Form 1065 is four pages long and includes two sections.

The first part covers income and deductions, while the second part covers business details such as entity type, ownership interests, total assets, and foreign partners.

Click here to view a PDF version of Form 1065 for more details.

Some lines cover obscure tax rules — for example, you’ll need to have the following information on hand:

• Whether your partnership is a 721(c) partnership
• Whether your partnership is required to file Form 8858
• Whether there were any transfers subject to disclosure requirements under Regulations section 1.707-8

It may be easier to work with a professional who understands the ins and outs of partnership taxes.

With Firstbase Accounting, you can catch up on your books, automatically generate tax-ready financial statements, and even rely on our team to submit your state + federal tax returns.

Other Filing Options

Depending on your business structure, you may have the ability to elect to file as a corporation or S-Corp.

Eligible entities can file Form 8832 to be classified as a corporation, partnership, or disregarded entity for tax purposes. 

Form 2553 is used to elect to file as an S-Corp, allowing eligible C-Corps to function as pass-through entities.

Depending on your election, you may no longer be required to file Form 1065, Schedule K-1, or other typical partnership documents.

Of course, you will now be responsible for the new filings associated with your chosen entity type.

Understanding your options will help you make more informed decisions and minimize your company’s tax burden.

Takeaways

US taxes can be incredibly complicated, but Form 1065 is actually fairly straightforward.

With a few exceptions, all partnerships must file a single Form 1065 along with separate Schedule K-1s for each individual partner.

Please note that the deadline is March 15th, 2024 for partnerships that followed the 2023 calendar year.

More questions? We’re here to make tax season as simple as possible.

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